Chairman and CEO Joe Mansueto kicked of Morningstar’s 2012 Investment Conference in Chicago on Wednesday afternoon with a perfunctory “reading of the numbers,” specifically noting the 1,850 attendees, 75 journalists and 200 exhibitors at this year’s show.
He then introduced the opening keynote speaker, famed Franklin Templeton fixed income manager Michael Hasenstab, by mentioning Hasenstab’s status as Morningstar’s 2010 fixed income manager of the year.
“When Michael began at Franklin Templeton, he managed $100 million,” Mansueto added. “Today, he is responsible for a group that oversees $160 billion in assets. The fund that he specifically manages, the Templeton Global Bond Fund, is second only to PIMCO Total Return in its size.”
The soft-spoken Hasenstab then took the stage and quipped, “We’re in a period of incredible uncertainty. I’d like a boring summer for a change, but it doesn’t look like it will happen.
“How should we separate the noise from the really key issues?” Hasenstab (left) rhetorically asked. “More importantly, should we panic?”
A good argument could be made for panicking, he said, especially if you think the European Union will break up and China will have a hard landing; global markets could not absorb either event and “it would make Lehman look like a warm-up.”
“But if we’re able to stay calm, we’ll need to think through the ‘tectonic shifts’ happening in the world that have largely been masked by the crisis in Greece,” he noted. “Will Greece bring down Europe? Italy and Spain are not Greece. The both have room under their debt-to-GDP ratio cap in which to maneuver. Greece, with its 100% debt-to-GDP ratio, does not.”
Greece could exit the euro, he added, but it would be incredibly expensive for its citizens and lead to hyperinflation and high unemployment. Another bailout from Germany and other countries could also occur, as the first bailout did little to address the underlying fiscal crisis.
“Here in the United States, being a safe haven as well as the world’s reserve currency is something of a curse. It allows politicians here to act irresponsibly without having to experience any short-term pain (although it will be felt long term). This isn’t true of Europe, where they essentially have a gun to their heads. They are making tough decisions that would previously been unheard of.”